ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES

Transcription

1 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010

2 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: Under the guidance of Prof. D.P.TRIPATHY DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010

3 National Institute of Technology Rourkela CERTIFICATE This is to certify that the thesis entitled ANALYSIS AND INTERPRETATION FINANCIAL STATEMENTS: CASE STUDIES submitted by Sri Sudip Das, Roll No: in partial fulfillment of the requirements for the award of Bachelor of Technology degree in Mining Engineering at the National Institute of Technology, Rourkela (Deemed University) is an authentic work carried out by him under my supervision and guidance. To the best of my knowledge, the matter embodied in the thesis has not been submitted to any other University/Institute for the award of any Degree or Diploma. Date: (Prof. D.P. TRIPATHY) Dept. of Mining Engineering National Institute of Technology Rourkela

4 ACKNOWLEDGEMENT I wish to express my deep sense of gratitude and indebtedness to Dr. D.P.Tripathy, Department of Mining Engineering, N.I.T, Rourkela for introducing the present topic and for his inspiring guidance, constructive criticism and valuable suggestions throughout the project work. I am also thankful to all staff members of Department of Mining Engineering, NIT, Rourkela. Lastly, I would like to thank and express my gratitude towards my friends who at various stages had lent a helping hand. Date: (Sudip Das)

5 ABSTRACT Financial statements are formal records of the financial activities of a business, person, or other entity and provide an overview of a business or person's financial condition in both short and long term. They give an accurate picture of a company s condition and operating results in a condensed form. Financial statements are used as a management tool primarily by company executives and investor s in assessing the overall position and operating results of the company. Analysis and interpretation of financial statements help in determining the liquidity position, long term solvency, financial viability and profitability of a firm. Ratio analysis shows whether the company is improving or deteriorating in past years. Moreover, Comparison of different aspects of all the firms can be done effectively with this. It helps the clients to decide in which firm the risk is less or in which one they should invest so that maximum benefit can be earned. Mining industries are capital intensive; hence a lot of money is invested in it. So before investing in such companies one has to carefully study its financial condition and worthiness. Unfortunately very limited work has been done on analysis and interpretation of financial statements of Indian for mining companies. An attempt has been carried out in this project to analyze and interpret the financial statements of five coal and non- coal mining companies. OBJECTIVES To understand, analyze and interpret the basic concepts of financial statements of different mining companies. Interpretation of financial ratios and their significance. Development of programs in C++ for calculation of different financial statements and financial ratios. Use of Tally 9.0 package for the analysis and interpretation of financial statements of mining companies. i

6 This project mainly focuses in detail the basic types of financial statements of different companies and calculation of financial ratios. Ratio analysis of five companies viz. ACC Ltd, Tata Steel, Jindal Steel & Power Limited, Hindustan Zinc Ltd. (HZL) and Gujarat Mineral Development Corporation (GMDC) was done. Computer programs were developed in Turbo C++ for the preparation/analysis of different financial statements and ratios. However, only eleven ratios could be calculated with it. In near future the program can be upgraded to calculate more ratios. Tally 9.0 was used for preparation of balance sheet, profit & loss statements and estimation of few financial ratios of selected companies. Profit & Loss Statements of companies were not calculated as Tally 9.0 has limitations in processing the data that was available. However, only three ratios viz. current ratio, quick ratio and debt-equity ratio were calculated. An advanced version can be developed for calculation of profit & loss statements and other financial ratios. From ratio analysis of Balance Sheet and P & L Statement of ACC Ltd. of it was concluded that liquidity position of the company is not good. Current ratio, debt-equity ratio, quick ratio, net profit margin, operating profit margin, gross profit margin, return on assets, return on investments and return on capital employed were found to be unacceptable. Short term liquidity position of JSPL in 2007 was good. However, current ratio, quick ratio, net profit margin, return on assets, return on investments and return on capital employed were unsatisfactory. The ratios that were found to be desirable are debt-equity ratio, operating profit margin and gross profit margin. In , net working capital available with the company was adequate. The ratios that were found to be satisfactory are quick ratio, debt-equity ratio, return on investments, return on net worth, operating profit margin and gross profit margin. Current ratio, return on capital employed, return on assets and net profit margin of the company were unacceptable. For Tata Steel in 2007, net working capital, quick ratio, return on investments, return on net worth, operating profit margin and gross profit margin of the company were satisfactory. However, debt-equity ratio, current ratio, net profit margin, return on capital employed and return on assets were undesirable. In 2008, only company s current ratio improved due to substantial increase in current assets position. In 2009, net working capital available was ii

7 inadequate. Company s debt-equity ratio, operating profit margin and gross profit margin were desirable and current ratio, return on investments, return on net worth, return on capital employed and return on assets were found to be unsatisfactory. Short term liquidity position of HZL was good in The ratios that were found to be satisfactory are operating profit margin, gross profit margin, net profit margin, return on capital employed, return on assets and return on net worth. Current ratio, quick ratio and debt-equity ratio were undesirable. In 2008, current assets position improved further that resulted in better current ratio and quick ratio. Debt-equity ratio was very low due to less investment. In 2009, return on capital employed, return on assets, return on investment and return on net worth remained unsatisfactory. For GMDC in 2007, net working capital available was adequate. Quick ratio, debt-equity ratio, operating profit margin and gross profit margin of the company was also desirable. However company s net profit margin, return on capital employed, return on assets, return on investment and return on net worth were undesirable. In 2008 & 2009, only debt-equity ratio of the company decreased as the debts have been cleared. In this project, comparison of different ratios viz. current ratio, debt-equity ratio, net profit margin and return on investment of all the above e companies has been done for the period It was observed that current ratio of ACC Ltd. was always less than 1 from which indicates that liquidity position of the company was not good. Current ratio of Jindal Steel & Power Ltd. and HZL was satisfactory as it remained more than 1 for all the five years. Liquidity position of Tata steel was not satisfactory as the ratio varied marginally from 0.71 to 0.97 in five years whereas current ratio of GMDC decreased from 2.48 to D-E ratio of ACC Ltd. decreased from 0.5 to 0.07 from and then increased to 0.09 in 2009 which indicates the debts have been cleared. Debt position of JSPL was satisfactory as the ratio varied from 1.13 to 0.91 from GMDC s D-E ratio was 1.45 from because of increasing investment and then came down to However D-E ratio of Tata Steel & HZL was less than 1 in five years as their debts were paid off. From , net profit margin of HZL increased from 29.9% to 47.9%. It remained the most profit making company compared to others due to their substantial increase in sales. Profitability iii

8 of ACC Ltd. varied marginally from 17.28% to 20.03%. Profit Margin of GMDC came down from 28.04% in to 23.6% in Though sales of the company JSPL, Tata Steel and GMDC increased, their profit percentage decreased from due to their decrease in net profit. ROI of ACC Ltd. increased from 18.16% to 37.7% in five years due to substantial increase in its profit before tax. Similarly, ROI of GMDC increased marginally from 22.41% to 30.97% in five years. From , ROI of HZL increased from 43.04% to 83.30% and in 2009 it declined to 22.69%. ROI of Tata Steel was highest in with 74.57% and then it declined to 23.62%. Similarly ROI of JSPL decreased from 52.31% to 39.44%. iv

9 CONTENTS Sl. No. Title Page No. Chapter-01 INTRODUCTION Objectives 1 Chapter -02 FINANCIAL STATEMENTS Balance Sheet Format of Balance Sheet Contents of Balance Sheet Profit and Loss Statement Format of Profit and Loss Statement Contents of Profit and Loss Statement Financial Ratios Objectives Financial Ratios and their Interpretation 14 Chapter -03 DEVELOPMENT OF PROGRAMME IN C++ FOR 22 PREPARATION OF FINANCIAL STATEMENTS & RATIOS 3.1 Output for preparation of Balance Sheet Output for preparation of Profit & Loss Statement Output for calculation of Financial Ratios 24 v

10 Chapter -04 FINANCIAL RATIO ANALYSIS : CASE STUDIES RATIO ANALYSIS ACC Ltd Ratio Analysis for Ratio Analysis for Ratio Analysis for Summary for Balance Sheet and Profit & Loss Statement Jindal Steel & Power Limited Ratio Analysis for Ratio Analysis for Ratio Analysis for Summary for Balance Sheet and Profit & Loss Statement Tata Steel Ratio Analysis for Ratio Analysis for Ratio Analysis for Summary for Balance Sheet and Profit & Loss Statement Hindustan Zinc Limited Ratio Analysis for Ratio Analysis for Ratio Analysis for Summary for Balance Sheet and Profit & Loss Statement Gujarat Mineral Development Corporation Ratio Analysis for Ratio Analysis for Ratio Analysis for Summary for Balance Sheet and Profit & Loss Statement RATIO ANALYSIS USING TURBO C ACC Ltd Ratio Analysis for Ratio Analysis for Ratio Analysis for vi

11 4.2.2 Jindal Steel & Power Limited Ratio Analysis for Ratio Analysis for Ratio Analysis for Tata Steel Ratio Analysis for Ratio Analysis for Ratio Analysis for Hindustan Zinc Limited Ratio Analysis for Ratio Analysis for Ratio Analysis for Gujarat Mineral Development Corporation Ratio Analysis for Ratio Analysis for Ratio Analysis for RATIO ANALYSIS USING TALLY ACC Ltd Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Jindal Steel & Power Limited Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Tata Steel Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for vii

12 4.3.4 Hindustan Zinc Limited Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Gujarat Mineral Development Corporation Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Balance Sheet & Ratio Analysis for Chapter -05 VARIATION OF FINANCIAL RATIOS ACC Ltd Jindal Steel & Power Limited Tata Steel Hindustan Zinc Limited Gujarat Mineral Development Corporation 120 Chapter -06 COMPARISON OF RATIO ANALYSIS OF ALL COMPANIES Comparison of Current ratio Comparison of Debt-equity Ratio Comparison of Net profit Margin Comparison of ROI 125 Chapter -07 CONCLUSION 127 REFERENCES 130 viii

13 LIST OF TABLES Sl. No. Title Page No. Table 2.1 Balance Sheet Statement 3 Table 2.2 Profit & Loss Statement 9 Table 2.3 Different Financial Ratios 14 Table 4.1 Balance Sheet of ACC Ltd. 25 Table 4.2 Profit & Loss Statement of ACC Ltd. 26 Table 4.3 Analysis of Financial Ratios for Table 4.4 Analysis of Financial Ratios for Table 4.5 Analysis of Financial Ratios for Table 4.6 Summary of Balance Sheet 36 Table 4.7 Summary of Profit & Loss Statement 36 Table 4.8 Balance Sheet of Jindal Steel & Power Ltd. 37 Table 4.9 Profit & Loss Statement of Jindal Steel & Power Ltd. 38 Table 4.10 Analysis of Financial Ratios for Table 4.11 Analysis of Financial Ratios for Table 4.12 Analysis of Financial Ratios for Table 4.13 Summary of Balance Sheet 48 Table 4.14 Summary of Profit & Loss Statement 48 Table 4.15 Balance Sheet of Tata Steel 49 Table 4.16 Profit & Loss Statement of Tata Steel 50 Table 4.17 Analysis of Financial Ratios for Table 4.18 Analysis of Financial Ratios for Table 4.19 Analysis of Financial Ratios for ix

14 Table 4.20 Summary of Balance Sheet 60 Table 4.21 Summary of Profit & Loss Statement 60 Table 4.22 Balance Sheet of Hindustan Zinc Ltd. 61 Table 4.23 Profit & Loss Statement Hindustan Zinc Ltd. 62 Table 4.24 Analysis of Financial Ratios for Table 4.25 Analysis of Financial Ratios for Table 4.26 Analysis of Financial Ratios for Table 4.27 Summary of Balance Sheet 72 Table 4.28 Summary of Profit & Loss Statement 72 Table 4.29 Balance Sheet of GMDC 73 Table 4.30 Profit & Loss Statement GMDC 74 Table 4.31 Analysis of Financial Ratios for Table 4.32 Analysis of Financial Ratios for Table 4.33 Analysis of Financial Ratios for Table 4.34 Summary of Balance Sheet 84 Table 4.35 Summary of Profit & Loss Statement 84 Table 6.1 Comparison of Current ratio 121 Table 6.2 Comparison of Debt Equity ratio 122 Table 6.3 Comparison of Net Profit Margin 124 Table 6.4 Comparison of ROI 125 x

15 LIST OF FIGURES Fig. 3.1 Preparation of Balance Sheet 22 Fig. 3.2 Calculation of Profit & Loss Statement 23 Fig. 3.3 Calculation of Financial Ratios 24 Fig. 4.1 Ratio Analysis of ACC Ltd. for Fig. 4.2 Ratio Analysis of ACC Ltd. for Fig. 4.3 Ratio Analysis of ACC Ltd. for Fig. 4.4 Ratio Analysis of JSPL for Fig. 4.5 Ratio Analysis of JSPL for Fig. 4.6 Ratio Analysis of JSPL for Fig. 4.7 Ratio Analysis of Tata Steel for Fig. 4.8 Ratio Analysis of Tata Steel for Fig. 4.9 Ratio Analysis of Tata Steel for Fig Ratio Analysis of HZL for Fig Ratio Analysis of HZL for Fig Ratio Analysis of HZL for Fig Ratio Analysis of GMDC for Fig Ratio Analysis of GMDC for Fig Ratio Analysis of GMDC for Fig Preparation of Balance Sheet of ACC Ltd. for Fig Ratio Analysis of ACC Ltd. for Fig Preparation of Balance Sheet of ACC Ltd. for Fig Ratio Analysis of ACC Ltd. for Fig Preparation of Balance Sheet of ACC Ltd. for Fig Ratio Analysis of ACC Ltd. for xi

16 Fig Preparation of Balance Sheet of JSPL for Fig Ratio Analysis of JSPL for Fig Preparation of Balance Sheet of JSPL for Fig Ratio Analysis of JSPL for Fig Preparation of Balance Sheet of JSPL for Fig Ratio Analysis of JSPL for Fig Preparation of Balance Sheet of Tata Steel for Fig Ratio Analysis of Tata Steel for Fig Preparation of Balance Sheet of Tata Steel for Fig Ratio Analysis of Tata Steel for Fig Preparation of Balance Sheet of Tata Steel for Fig Ratio Analysis of Tata Steel for Fig Preparation of Balance Sheet of HZL for Fig Ratio Analysis of HZL for Fig Preparation of Balance Sheet of HZL for Fig Ratio Analysis of HZL for Fig Preparation of Balance Sheet of HZL for Fig Ratio Analysis of HZL for Fig Preparation of Balance Sheet of GMDC for Fig Ratio Analysis of GMDC for Fig Preparation of Balance Sheet of GMDC for Fig Ratio Analysis of GMDC for Fig Preparation of Balance Sheet of GMDC for Fig Ratio Analysis of GMDC for xii

17 Fig. 5.1 Variation of ratios of ACC Ltd. 116 Fig. 5.2 Variation of ratios of Jindal Steel & Power Ltd. 117 Fig. 5.3 Variation of ratios of Tata Steel 118 Fig. 5.4 Variation of ratios of HZL 119 Fig. 5.5 Variation of ratios of GMDC 120 Fig. 6.1 Comparison of Current ratio of all companies 122 Fig. 6.2 Comparison of Debt- Equity ratio of all companies 123 Fig. 6.3 Comparison of Net Profit Margin of all companies 124 Fig. 6.4 Comparison of ROI of all companies 126 xiii

18 CHAPTER- 01 INTRODUCTION Financial statements are records that provide an indication of the organization s financial status. It quantitatively describes the financial health of the company. It helps in the evaluation of company s prospects and risks for the purpose of making business decisions. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. They give an accurate picture of a company s condition and operating results in a condensed form. Reported assets, liabilities and equity are directly related to an organization's financial position whereas reported income and expenses are directly related to an organization's financial performance. Analysis and interpretation of financial statements helps in determining the liquidity position, long term solvency, financial viability, profitability and soundness of a firm. There are four basic types of financial statements: balance sheet, income statements, cashflow statements, and statements of retained earnings. Mining industries are capital intensive. Hence a lot capital is invested in it. Unfortunately very limited work has been done on analysis and interpretation of financial statements of Indian for mining companies. An attempt has been carried out in this project to analyze and interpret the financial statements of five coal and non- coal mining companies. 1.1 OBJECTIVES To understand, analyze and interpret the basic concepts of financial statements of different mining companies. Interpretation of financial ratios and their significance. Development of programs in C++ for calculation of different financial statements and financial ratios. Use of Tally 9.0 package for the analysis and interpretation of financial statements of mining companies

19 CHAPTER -02 FINANCIAL STATEMENTS Financial statements (or financial reports) are formal records of the financial activities of a business, person, or other entity. Financial statements provide an overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise, presented in a structured manner and in a form easy to understand is called the financial statements. There are four basic financial statements: 1. Balance sheet: It is also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity as of a given point in time. 2. Income statement: It is also referred to as Profit and Loss statement (or "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. 3. Statement of Retained Earnings: It explains the changes in a company's retained earnings over the reporting period. 4. Cash Flow Statement: It reports on a company's cash flow activities, particularly its operating, investing and financing activities. 2.1 BALANCE SHEET In financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances. A balance sheet is often described as a snapshot of a company's financial condition. It summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time. A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or - 2 -

20 capital of the company. It's called a balance sheet because the two sides balance out. A typical format of the balance sheet has been given in Table 2.1. It works on the following formula: Assets = Liabilities + Shareholders' Equity FORMAT OF BALANCE SHEET Table 2.1: Balance Sheet of XYZ Company LIABILITIES Share capital (1) Reserves and surplus (2) Secured Loans (3) Unsecured loans (4) Total Liabilities = (1)+(2)+(3)+(4) ASSETS Fixed Assets (5) Gross Block Less: Accelerated Depreciation Net Block Capital work in progress Investments Current Assets (6) Inventories Sundry Debtors Cash and Bank balances Loans and Advances - 3 -

21 (7) Current liabilities Provisions Net Current Assets (6) (7) = (8) Total Assets = (5) +(8) CONTENTS OF BALANCE SHEET (A) Assets In business and accounting, assets are economic resources owned by business or company. Any property or object of value that one possesses, usually considered as applicable to the payment of one's debts is considered an asset. Simplistically stated, assets are things of value that can be readily converted into cash. The balance sheet of a firm records the monetary value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. Types of Assets Two major types: Tangible assets Intangible assets Tangible Assets Tangible assets are those have a physical substance, such as equipment and real estate. Intangible Assets Intangible assets lack physical substance and usually are very hard to evaluate. Assets which do not possess any material value. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc

22 Types of Tangible Assets Fixed assets. Current assets. Fixed Assets This group includes land, buildings, machinery, vehicles, furniture, tools, and certain wasting resources e.g., timberland and minerals. It is also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. Current Assets Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets: Cash and Cash Equivalents It is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts). Short-term Investments It includes securities bought and held for sale in the near future to generate income on shortterm price differences (trading securities). Receivables It is usually reported as net of allowance for uncollectable accounts. Inventory The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Prepaid Expenses These are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance). The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities

23 I. Gross Block Gross block is the sum total of all assets of the company valued at their cost of acquisition. This is inclusive of the depreciation that is to be charged on each asset. Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset are worth to the company. II. Capital Work in Progress Work that has not been completed but has already incurred a capital investment from the company. This is usually recorded as an asset on the balance sheet. Work in progress indicates any good that is not considered to be a final product, but must still be accounted for because funds have been invested toward its production. III. Investments Shares And Securities, such as bonds, common stock, or long-term notes Associate Companies Fixed deposits with banks/finance companies Investments in special funds (e.g., sinking funds or pension funds). Investments in fixed assets not used in operations (e.g., land held for sale). Remark: While fixed deposits with banks are considered as fixed assets, the investments in associate concerns are treated as non current assets. IV. Loans and Advances include House building advance Car, scooter, computer etc. advance Multi purpose advance Transfer travelling allowance advance Tour travelling allowance advance DRS payment

24 V. Reserves Subsidy Received From The Govt. Development Rebate reserve Issue of Shares at Premium General Reserves (B) Liability A liability is a debt assumed by a business entity as a result of its borrowing activities or other fiscal obligations (such as funding pension plans for its employees). Liabilities are debts and obligations of the business they represent creditors claim on business assets. Types of Liabilities Current liabilities are short-term financial obligations that are paid off within one year or one current operating cycle. These liabilities are reasonably expected to be liquidated within a year. It includes: Accrued expenses as wages, taxes, and interest payments not yet paid Accounts payable Short-term notes Cash dividends and Revenues collected in advance of actual delivery of goods or services. Long-Term Liabilities Liabilities that are not paid off within a year, or within a business's operating cycle, are known as long-term or non-current liabilities. Such liabilities often involve large sums of money necessary to undertake opening of a business, major expansion of a business, replace assets, or - 7 -

25 make a purchase of significant assets. These liabilities are reasonably expected not to be liquidated within a year. It includes : Notes payable- debt issued to a single investor. Bonds payable debt issued to general public or group of investors. Mortgages payable. Capital lease obligations contract to pay rent for the use of plant, property or equipments. deferred income taxes payable, and pensions and other post-retirement benefits. Contingent Liabilities A third kind of liability accrued by companies is known as a contingent liability. The term refers to instances in which a company reports that there is a possible liability for an event, transaction, or incident that has already taken place; the company, however, does not yet know whether a financial drain on its resources will result. It also is often uncertain of the size of the financial obligation or the exact time that the obligation might have to be paid. Fixed Liability The liability which is to be paid of at the time of dissolution of firm is called fixed liability. Examples are Capital, Reserve and Surplus. Secured Loans A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. Unsecured Loans An unsecured loan is a loan that is not backed by collateral. Also known as signature loan or personal loan. Unsecured loans are based solely upon the borrower's credit rating. An unsecured loan is considered much cheaper and carries less risk to the borrower. However, when an unsecured loan is granted, it does not necessarily have to be based on a credit score

26 2.2 PROFIT & LOSS STATEMENT Income statement, also called profit and loss statement (P&L) and Statement of Operations is financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time. A typical format of the Profit & Loss Statement has been given in Table FORMAT OF PROFIT & LOSS STATEMENT Table 2.2: Profit & Loss Statement of XYZ Company Turnover Cost of sales Gross Profit Distribution cost Administration Expenses Other income Operating Profit Income from other investments Profit before interest Net interest Profit before Tax Tax Payable - 9 -

27 Profit after tax Dividend Retained profit CONTENTS OF PROFIT & LOSS STATEMENT (a) Revenue - Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations. (b) Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations. (c) Turnover The main source of income for a company is its turnover, primarily comprised of sales of its products and services to third-party customers. (d) are normally accounted for when goods or services are delivered and invoiced, and accepted by the customer, even if payment is not received until some time later, even in a subsequent trading period. (e) Cost of (COS) The sum of direct costs of goods sold plus any manufacturing expenses relating to the sales (or turnover) is termed cost of sales, or production cost of sales, or cost of goods sold. These costs include: costs of raw materials stocks costs of inward-bound freight paid by the company

28 Packaging costs direct production salaries and wages production expenses, including depreciation of trading-related fixed assets. (f) Other Operating Expenses These are not directly related to the production process, but contributing to the activity of the company, there are further costs that are termed other operating expenses. These comprises of costs like: Distribution costs and selling costs, Administration costs, and Research and development costs (unless they relate to specific projects and the costs may be deferred to future periods). (g) Other Operating Income Other operating income includes all other revenues that have not been included in other parts of the profit and loss account. It does not include sales of goods or services, reported turnover, or any sort of interest receivable, reported within the net interest category. (h) Gross Margin (or Gross Profit) The difference between turnover, or sales, and COS is gross profit or gross margin. It needs to be positive and large enough to at least cover all other expenses. (i) Operating Profit (OP) The operating profit is the net of all operating revenues and costs, regardless of the financial structure of the company and whatever exceptional events occurred during the period that resulted in exceptional costs. The profit earned from a firm's normal core business operations. Also known as Earnings before Interest and Tax (EBIT). OP = Turnover - COS - other Operating Expenses + Other Operating Income

29 (j) Profit before Tax (PBT) A profitability measure that looks at a company's profits before the company has to pay corporate income tax. This measure deducts all expenses from revenue including interest expenses and operating expenses, but it leaves out the payment of tax. (k) Profit after Tax (PAT) PAT, or net profit, is the profit on ordinary activities after tax. The final charge that a company has to suffer, provided it has made sufficient profits, is therefore corporate taxation. PAT = PBT - Corporation Tax (l) Retained Profit The retained profit for the year is what is left on the profit and loss account after deducting dividends for the year. The balance on the profit and loss account forms part of the capital (or equity, or shareholders funds) of the company

30 2.3 FINANCIAL RATIOS OBJECTIVES The importance of ratio analysis lies in the fact that it presents data on a comparative basis and enables the drawing of inferences regarding the performance of the firm. Ratio analysis helps in concluding the following aspects: Liquidity Position: Ratio analysis helps in determining the liquidity position of the firm. A firm can be said to have the ability to meet its current obligations when they become due. It is measured with the help of liquidity ratios. Long- Term Solvency: Ratio analysis helps in assessing the long term financial viability of a firm. Long- term solvency measured by leverage/capital structure and profitability ratios. Operating Efficiency: Ratio analysis determines the degree of efficiency of management and utilization of assets. It is measured by the activity ratios. Over-All Profitability: The management of the firm is concerned about the overall profitability of the firm which ensures a reasonable return to its owners and optimum utilization of its assets. This is possible if an integrated view is taken and all the ratios are considered together. Inter- firm Comparison: Ratio analysis helps in comparing the various aspects of one firm with the other

31 2.3.2 FINANCIAL RATIOS AND THEIR INTERPRETATION Table 2.3: Different Financial Ratios Sl.No. CATEGORY TYPES OF RATIO INTERPRETATION Net Working Capital = Current assets-current liabilities It measures the liquidity of a firm. 1. Liquidity ratios Current ratio = Current Assets It measures the short term liquidity of a firm. A firm with a higher ratio has better liquidity. A ratio of 2:1 is considered safe. Acid test or Quick ratio = Quick assets It measures the liquidity position of a firm. A ratio of 1:1 is considered safe. 2. Turnover ratios Inventory Turnover ratio = Costs of good sold Average inventory This ratio indicates how fast inventory is sold. A firm with a higher ratio has better liquidity. Debtor Turnover ratio = Net credit sales Average debtors This ratio measures how fast debts are collected. A high ratio indicates shorter time lag between credit sales and cash collection. Creditor s Turnover ratio = Net credit purchases Average Creditors A high ratio shows that accounts are to be settled rapidly

32 Sl. No. CATEGORY TYPES OF RATIO INTERPRETATION 3. Capital Structure Ratios Debt-Equity ratio = Long term debt shareholder s Equity This ratio indicates the relative proportions of debt and equity in financing the assets of a firm. A ratio of 1:1 is considered safe. Debt to Total capital ratio = Long term debt Permanent Capital It indicates what proportion of the permanent capital of a firm consists of long-term debt. A ratio 1:2 is considered safe. Or Total debt Permanent capital+current liabilities It measures the share of the total assets financed by outside funds. A low ratio is desirable for creditors. Or Total Shareholder s Equity Total Assets It shows what portion of the total assets is financed by the owners capital. A firm should neither have a high ratio nor a low ratio

33 Sl.No. CATEGORY TYPES OF RATIO INTERPRETATION 4. Coverage ratios Interest Coverage = Earning before Interests and Tax interest A ratio used to determine how easily a company can pay on outstanding debt. A ratio of more than 1.5 is satisfactory. Dividend Coverage = Earning after tax Preference Dividend It measures the ability of firm to pay dividend on preference shares. A high ratio is better for creditors. Total Coverage ratio = Earning before interests and tax Total ixed charges It shows the overall ability of the firm to fulfill the liabilities. A high ratio indicates better ability

34 Sl. No. CATEGORY TYPES OF RATIO INTERPRETATION 5. Profitability ratios Gross Profit margin = Gross pro it 100 It measures the profit in relation to sales. A firm should neither have a high ratio nor a low ratio. Net Profit margin = Net Pro it after tax before interest It measures the net profit of a firm with respect to sale. Or Net Pro it after Tax and Interest A firm should neither have a high ratio nor a low ratio. Or Net pro it after Tax and Interest 6. Expenses ratios Operating ratio = Cost of Goods sold+other expenses Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. Cost of Goods sold ratio = Cost of Goods sold It measures the cost of goods sold per sale. Specific Expenses ratio = Speci ic Expenses It measures the specific expenses per sale

35 Sl.No. CATEGORY TYPES OF RATIO INTERPRETATION 7. Return on Investments Return on Assets (ROA) = Net Pro it after Taxes 100 Total Assets Or (Net Pro it after Taxes+Interest) 100 Total Assets It measures the profitability of the total funds per investment of a firm. Or (Net pro it after Taxes+Interest) 100 Tangible Assets Or (Net Pro it after Taxes+Interest) 100 Total Assets Or ( Net Pro it after Taxes+Interest) 100 Fixed Assets Return on Capital Employed (ROCE) = (Net Pro it after Taxes) 100 total capital employed Or (Net Pro it after Taxes+Interest) 100 Total Capital Employed Or (Net Pro it after Taxes+Interest) 100 Total Capital Employed Intangible assets It measures profitability of the firm with respect to the total capital employed. The higher the ratio, the more efficient use of capital employed

36 Sl.No. CATEGORY TYPES OF RATIO INTERPRETATION Return on Total Shareholders Equity = Net Pro it after Taxes 100 Total shareholders equity It reveals how profitably the owner s fund has been utilized by the firm. Return on Ordinary shareholders equity = Net pro it after taxes and Pref.dividend 100 Ordinary Shareholders Equity It determines whether the firm has earned satisfactory return for its equity holders or not. 8. Shareholder s ratios Earnings per Share (EPS) = Net Pro it of Equityholders Number of Ordinary Shares It measures the profit available to the equity holders on a per share basis. Dividend per Share (DPS) = Net pro its after interest and preference dividend paid to ordinary shareholders Number of ordinary shares outstanding It is the net distributed profit belonging to the shareholders divided by the number of ordinary shares. Dividend Payout ratio (D/P) = Total Dividend To Equityholders Total net pro it of equityholders Or Dividend per Ordinary Share Earnings per Share It shows what percentage share of the net profit after taxes and preference dividend is paid to the equity holders. A high D/P ratio is preferred from investor s point of view

37 Earnings per Yield = Earnings per Share Market Value per Share Dividend Yield = Dividend per share Market Value per share It shows the percentage of each rupee invested in the stock that was earned by the company. It shows how much a company pays out in dividends each year relative to its share price. Price- Earnings ratio (P/E) = Market value per Share Earnings per Share It reflects the price currently paid by the market for each rupee of EPS. Higher the ratio better it is for owners. Earning Power = Net pro it after Taxes Total Assets It measures the overall profitability and operational efficiency of a firm. 9. Activity Ratios Inventory turnover = Closing Inventory Raw Material turnover = It measures how quickly inventory is sold. A firm should neither have a high ratio nor a low ratio. Cost of Raw Material used Average Raw Material Inventory Work in Progress turnover = Cost of Goods manufactured Average Work in process inventory Debtors turnover = Cost of Goods manufactured Average Work in Process Inventory It shows how quickly current assets i.e receivables or debtors are converted to cash. A firm should neither have a high ratio nor a low ratio

38 Sl. No. CATEGORY TYPES OF RATIO INTERPRETATION 10. Assets Turnover Ratios Total Assets turnover = Cost of Goods Sold Total Assets It measures the efficiency of a firm in managing and utilizing its assets. Fixed Assets turnover = Cost of Goods Sold Fixed Assets Higher the ratio, more efficient is the firm in utilizing its assets. Capital turnover = Cost of Goods Sold Capital Employed Current Assets turnover = Cost of Goods Sold Current Assets

39 CHAPTER -03 DEVELOPMENT OF PROGRAMME IN C++ FOR PREPARATION OF FINANCIAL STATEMENTS & RATIOS The program for preparation of financial statements & calculation of financial ratios have been developed in turbo C++ and the output has been given below: 3.1 Output for Preparation of Balance Sheet (This data has been taken from Table 4.20: Balance Sheet, Section Hindustan Zinc Ltd.) Fig. 3.1: Preparation of Balance Sheet

40 3.2 Output for Preparation of Profit & Loss Statement (This data has been taken from Table 4.21: Profit & Loss Statement, Section 4.1.4: HZL.) Fig. 3.2: Calculation of P & L Statement

41 3.3 Output for Calculation of Financial Ratios (This data has been taken from Table 4.8 and 4.9, Section 4.1.2: Jindal Steel & Power.) Fig. 3.3: Calculation of Financial Ratios

42 CHAPTER- 04 FINANCIAL RATIO ANALYSIS The ratio analysis of five companies from has been carried out below. 4.1 RATIO ANALYSIS ACC Ltd. Table 4.1: Balance Sheet of ACC Ltd. as at 31 st Dec-2009 Liabilities Dec (Rs in millions) Dec (Rs in millions) Dec (Rs in millions) Share Capital , , Reserves & Surplus , , Net Worth (1) , , Secured Loans (2) , , Unsecured Loans (3) Total Liabilities , , Assets Dec Dec Dec Gross Block , , (-) Acc. Depreciation , , Net Block (A) , , Capital Work in Prgs , , Investments (C) , , Inventories 7, , , Sundry Debtors 2, , , Cash And Bank 7, , , Loans And Advances 7, , , (i) 24, , , , , , Provisions 10, , , (ii) 36, , , Net Curr. Assets -12, , , Misc. Expenses (E) Total Assets 65, , , (Source:

43 Table 4.2: Profit & Loss Statement Dec (Rs in millions) Dec (Rs in millions) Dec (Rs in millions) 80, , , Other Income 1, , , Total Income 81, , , Raw Material 12, , , Cost Excise 7, , , Other Expenses 34, , , Operating Profit 25, , , Interest Name Gross Profit 24, , , Depreciation 3, , , Profit Bef. Tax 22, , , Tax 6, , , Net Profit 15, , , Other Non- Recurring , Income Reported Profit 16, , , Equity Dividend 4, , , (Source:

44 Ratio analysis for 2009 Table 4.3: Analysis of Financial Ratios for 2009 Sl. No. Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = 24, = 36, Values Remarks Liquidity position is not good. 02. Current Ratio = Current Assets Current Assets = 24, = 36, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 36, It is not good. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = It is not safe. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 25, Interest = It is satisfactory. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 25, = 80, % It is not satisfactory

45 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 24, = 80, % It is not satisfactory. 08. Net Profit margin = Net Pro it 100 Net Profit = 16, = 80, % It is not satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 25, Average Assets = % It is not good. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = 22, Net Worth = % It is not good. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 15, Average Net Worth = % It is not safe

46 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 25, Avg. Capital Employed = % It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 12, = 80, It is satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 34, It is not satisfactory. 15. Fixed Assets turnover = Fixed Assets = = 80, It is not safe

47 Ratio analysis for 2008 Table 4.4: Analysis of Financial Ratios for 2008 Sl. No. Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = = Values Remarks Liquidity available is less. 02. Current Ratio = Current Assets Current Assets = = It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = It is not satisfactory. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = It is not good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is not safe

48 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is not good. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = Average Assets = % It is not satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Networth Profit Before Tax = Net Worth = % It is safe. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is not satisfactory

49 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not satisfactory. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = = It is satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses= It is not good. 15. Fixed Assets turnover = Fixed Assets = = It is not safe

50 Ratio Analysis for 2007 Table 4.5: Analysis of Financial Ratios for 2007 Sl. No. Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = = Values Remarks Liquidity available is less. 02. Current Ratio = Current Assets Current Assets = = It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = It is not satisfactory. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 41, It is not good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is not safe

51 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is not good. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = Average Assets = % It is not satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = Net Worth = 41, % It is satisfactory. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is safe

52 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 18, = It is satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = It is not satisfactory. 15. Fixed Assets turnover = Fixed Assets = = It is not satisfactory

53 Summary for Balance Sheet and Profit & Loss Statement Table 4.6: Summary of Balance Sheet 2007 (Rs in millions) 2008 (Rs in millions) 2009 (Rs in millions) Current Assets 23, , , Fixed Assets Remarks Short term liquidity has increased marginally. Substantial increase in fixed assets due to increase in gross block. Current Liabilities Long term Liabilities 26, , Current liabilities have increased. NWC is affected. Debts have been paid off. Table 4.7: Summary of Profit & Loss statement Remarks (Rs in millions) (Rs in millions) (Rs in millions) 68, , , position has increased. Raw Material Cost 18, , , Expenses have decreased. Operating Profit 19, , , Operating profit has increased. Profit Bef. Tax (PBT) 17, , , PBT has increased. Net profit 12, , , Net profit has increased by 30.7 %

54 4.1.2 Jindal Steel & Power Ltd. Table 4.8: Balance Sheet of Jindal Steel & Power Ltd. as at 31 st Mar-2009 Liabilities March (Rs in millions) March (Rs in millions) March (Rs in millions) Share Capital Reserves & Surplus 53, , , Net Worth (1) 54, , , Secured Loans (2) 21, , , Unsecured Loans (3) 28, , , Total Liabilities( , , , Assets March March March Gross Block 73, , , (-) Acc. Depreciation 16, , , Net Block (A) 57, , , Capital Work in Prgs. (B) 23, , , Investments (C) 12, , , Inventories 12, , , Sundry Debtors 3, , , Cash And Bank 3, , Loans And Advances 32, , , (i) 51, , , , , , Provisions 9, , , (ii) 41, , , Net Curr. Assets (i - ii) (D) 10, , , Misc. Expenses (E) Total Assets (A+B+C+D+E) 103, , , (Source :

55 Table 4.9: Profit & Loss Statement of Jindal Steel & Power Ltd. March (Rs in millions) March (Rs in millions) March (Rs in millions) 76, , , Other Income 1, Total Income 78, , , Raw Material Cost 34, , , Excise 7, , , Other Expenses 8, , , Operating Profit 26, , , Interest Name 2, , , Gross Profit 23, , , Depreciation 4, , , Profit Bef. Tax 21, , , Tax 4, , , Net Profit 16, , , Other Non- Recurring -1, , Income Reported Profit 15, , , Equity Dividend (Source:

56 Ratio Analysis for 2009 Table 4.10: Analysis of Financial Ratios for 2009 Sl. No. Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = = Values Remarks Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = = It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = It is good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is safe

57 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not desirable. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = Average Assets = % It is not satisfactory 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = Net Worth = % It is satisfactory 11. Return on Net Worth = Net Pro it 100 Average Net Worth Net profit = 16, Average Net Worth = % It is satisfactory

58 Sl. No Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 34, = It is not satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 8, It is not satisfactory. 15. Fixed Assets turnover = Fixed Assets = = It is good

59 Ratio Analysis for 2008 Table 4.11: Analysis of Financial Ratios for 2008 Sl. No Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = 32, = 21, Values Remarks Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 32, = 21, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 21, It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 37, It is good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 22, Interest = 2, It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 22, = 53, % It is safe

60 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 20, = 53, % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = = 53, % It is not good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 22, Average Assets = % It is not good. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = Net Worth = % It is satisfactory 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is satisfactory

61 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 22, Avg. Capital Employed = % It is not good 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 17, = 53, It is not satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = It is not satisfactory. 15. Fixed Assets turnover = Fixed Assets = = 53, It is good

62 Ratio Analysis for 2007 Table 4.12: Analysis of Financial Ratios for 2007 Sl. No Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = 18, =15, Values Remarks Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 18, =15, It is not satisfactory. 03. Acid test or Quick ratio = Quick Assets Quick Assets = =15, It is not satisfactory. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 24, It is good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 14, Interest = 1, It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 14, = 35, % It is satisfactory

63 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 12, = 35, % It is satisfactory 08. Net Profit margin = Net Pro it 100 Net Profit = 7, = 35, % It is not satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 14, Average Assets = % It is not satisfactory 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = 9, Net Worth = 24, % It is safe. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 6, Average Net Worth = % It is good

64 Sl. No Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 14, Avg. Capital Employed = % It is not safe. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 10, = 35, It is not satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 6, It is not satisfactory 15. Fixed Assets turnover = Fixed Assets = = 35, It is not good

65 Summary for Balance Sheet and Profit & Loss Statement Table 4.13: Summary of Balance Sheet 2007 (Rs in millions) 2008 ( Rs in millions) 2009 (Rs in millions) Current Assets Fixed Assets Current Liabilities Remarks Current asset position has increased. Liquidity position is very good. Fixed Assets have increased due to increase in gross block. have increased marginally. Long term Liabilities Debts have increased due to more investment. Table 4.14: Summary of Profit & Loss Statement Remarks (Rs in millions) (Rs in millions) (Rs in millions) 35, , , position has doubled. Raw Material Cost 10, , , Purchase of raw material has increased. Operating Profit 14, , , Operating profit has increased. Profit Bef. Tax (PBT) 9, , , PBT has increased. Net profit 6, , , Net profit has increased 140.7%

66 4.1.3 Tata Steel Liabilities Table 4.15: Balance Sheet of Tata Steel as at 31 st mar-2009 March (Rs in millions) March (Rs in millions) March (Rs in millions) Share Capital 62, , , Reserves & Surplus 235, , , Net Worth (1) 297, , , Secured Loans (2) 39, , , Unsecured Loans (3) 230, , , Total Liabilities(1+2+3) 566, , , Assets March March March Gross Block 200, , , (-) Acc. Depreciation 90, , , Net Block (A) 109, , , Capital Work in Prgs. (B) 34, , , Investments (C) 423, , , Inventories 34, , , Sundry Debtors 6, , , Cash And Bank 15, , , Loans And Advances 58, , , (i) 115, , , , , , Provisions 29, , , (ii) 118, , , Net Curr. Assets (i - ii) (D) -3, , , Misc. Expenses (E) 1, , , Total Assets (A+B+C+D+E) 566, , , (Source:

67 Table 4.16: Profit & Loss Statement Tata Steel March (Rs in millions) March (Rs in millions) March (Rs in millions) 243, , , Other Income 3, , , Total Income 246, , , Raw Material Cost 82, , , Excise 24, , , Other Expenses 43, , , Operating Profit 91, , , Interest Name 14, , , Gross Profit 76, , , Depreciation 9, , , Profit Bef. Tax 70, , , Tax 21, , , Net Profit 49, , , Other Non- Recurring Income Reported Profit 2, , , , , Equity Dividend 11, , , (Source:

68 Ratio Analysis for 2009 Table 4.17: Analysis of Financial Ratios for 2009 Sl. No. Ratios 01. Net Working Capital = Current assets-current liabilities Particulars (Rs in millions) Current Assets = 115, =118, Values Remarks Liquidity available is less. 02. Current Ratio = Current Assets Current Assets = 115, = 118, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = =118, It is not safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 297, It is good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 91, Interest = 14, It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 91, = 243, % It is good

69 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 76, = 243, % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = 52, =243, % It is not good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 91, Average Assets = % It is not good. 10. Return on Investments = Pro it Before Tax 100 Net worth Profit Before Tax = Net Worth = % It is not satisfactory 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is not good

70 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 91, Avg. Capital Employed = % It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 82, = 243, It is not satisfactory 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 43, It is not satisfactory 15. Fixed Assets turnover = Fixed Assets = = 243, It is satisfactory

71 Ratio Analysis for 2008 Table 4.18: Analysis of Financial Ratios for 2008 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = = Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = = It is safe 03. Acid test or Quick ratio = Quick Assets Quick Assets = = It is satisfactory 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = It is not safe 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is not satisfactory 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is satisfactory

72 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = Average Assets = % It is not safe. 10. Return on Investments = Pro it before Tax 100 Net worth Profit Before Tax = Net Worth = % It is not good. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is not satisfactory

73 Sl. No. Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not safe 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = = It is not satisfactory 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = It is not satisfactory 15. Fixed Assets turnover = Fixed Assets = = It is not safe

74 Ratio Analysis for 2007 Table 4.19: Analysis of Financial Ratios for 2007 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 146, = 82, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 146, = 82, It is not satisfactory. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 82, It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 140, It is not safe. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 69, Interest = 2, It is not satisfactory. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 69, = 174, % It is good

75 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 66, = 174, % It is satisfactory. 08. Net Profit margin = Net Pro it 100 Net Profit = 42, = 174, % It is not satisfactory. 09. Return on Assets = Operating Pro it Average Assets Operating Profit = 69, Average Assets = % It is not good. 10. Return on Investments = Pro it Before Tax 100 Net Worth Profit Before Tax = 63, Net Worth = 140, % It is safe. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 42, Average Net Worth = % It is good

76 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 69, Avg. Capital Employed = % It is not satisfactory. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 56, = 174, It is not good. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 25, It is not good. 15. Fixed Assets turnover = Fixed Assets = = 174, It is not safe

77 Summary for Balance Sheet and Profit & Loss Statement Table 4.20: Summary of Balance Sheet Current Assets 2007 (Rs in millions) 2008 (Rs in millions) 2009 (Rs in millions) Remarks Short term liquidity available is very less. Fixed Assets Fixed Assets have increased due to increase in investment. Current Liabilities Long term Liabilities Substantial increase in liabilities. Liquidity position is not good. Debts have increased because of more investment. Table 4.21: Summary of Profit & Loss Statement Remarks ( Rs in millions) (Rs in millions) (Rs in millions) 174, , , have increased by 39.5 % Raw Material Cost 56, , , Expenses have increased. Operating Profit 69, , , Operating profit has increased. Profit Bef. Tax (PBT) 63, , , PBT has increased. Net profit 42, , , Net profit has increased marginally

78 4.1.4 HINDUSTAN ZINC LIMITED Table 4.22: Balance Sheet of HZL as at 31 st Mar-2009 Liabilities March ( Rs in millions) March ( Rs in millions) (Source: March ( Rs in millions) Share Capital 4, , , Reserves & Surplus 139, , , Net Worth (1) 143, , , Secured Loans (2) Unsecured Loans (3) Total Liabilities(1+2+3) 143, , , Assets March March March Gross Block 58, , , (-) Acc. Depreciation 17, , , Net Block (A) 41, , , Capital Work in Prgs. (B) 11, , , Investments (C) 69, , , Inventories 5, , , Sundry Debtors 1, , , Cash And Bank 27, , , Loans And Advances 3, , , (i) 37, , , , , , Provisions 1, , , (ii) 15, , , Net Curr. Assets (i - ii) (D) 22, , , Misc. Expenses (E) Total Assets (A+B+C+D+E) 143, , ,

79 Table 4.23 : Profit & Loss Statement of HZL March (12 months) March (12 months) March (12 months) 56, , , Other Income 8, , , Total Income 65, , , Raw Material 6, , , Cost Excise 4, , , Other Expenses 18, , , Operating Profit 27, , , Interest Name Gross Profit 27, , , Depreciation 2, , , Profit Bef. Tax 32, , , Tax 6, , , Net Profit 25, , , Other Non- Recurring 1, , , Income Reported Profit 27, , , Equity Dividend 1, , , (Source:

80 Ratio Analysis for 2009 Table 4.24: Analysis of Financial Ratios for 2009 Sl. No. Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 37, =15, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets =37, =15, It is satisfactory 03. Acid test or Quick ratio = Quick Assets Quick Assets = =15, It is satisfactory 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = Shareholder Equity = 143, It is not good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 27, Interest = It is satisfactory 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 27, = 56, % It is good

81 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 27, = 56, % It is satisfactory. 08. Net Profit margin = Net Pro it 100 Net Profit = 27, =56, % It is satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 27, Average Assets = % It is not good. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = 32, Net Worth = 143, % It is not satisfactory. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 25, Average Net Worth = % It is not safe

82 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 27, Avg. Capital Employed = % It is not satisfactory. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 6, = 56, It is good. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 18, It is not good. 15. Fixed Assets turnover = Fixed Assets = = 56, It is not safe

83 Ratio Analysis for 2008 Table 4.25: Analysis of Financial Ratios for 2008 Sl. No Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 27, = 13, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 27, = 13, It is satisfactory. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 13, It is good. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = 3.90 Shareholder Equity = 118, It is not safe. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 53, Interest = It is satisfactory. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 53, = 78, % It is good

84 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 53, = 78, % It is satisfactory. 08. Net Profit margin = Net Pro it 100 Net Profit = 43, = 78, % It is satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 53, Average Assets = % It is good. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = 56, Net Worth = 118, % It is good. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 40, Average Net Worth = % It is safe

85 Sl. No Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 53, Avg. Capital Employed = % It is not satisfactory. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 5, = 78, It is not good. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 11, It is not good. 15. Fixed Assets turnover = Fixed Assets = = 78, It is not safe

86 Ratio Analysis for 2007 Table 4.26: Analysis of Financial Ratios for 2007 Sl. No Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 14, =11, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets =14, = 11, It is not safe 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 11, It is not satisfactory. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = 3.90 Shareholder Equity = 76, It is not safe 05. Interest Coverage = Operating Pro it Interest Operating Profit = 64, Interest = It is good. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 64, = 85, % It is good

87 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 63, = 85, % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = 44, = 85, % It is good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 64, Average Assets = % It is satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = 63, Net Worth = 76, % It is satisfactory. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is good

88 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 64, Avg. Capital Employed = % It is satisfactory 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = 2, = 85, It is safe. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 11, It is safe. 15. Fixed Assets turnover = Fixed Assets = = 85, It is not satisfactory

89 Summary for Balance Sheet and Profit & Loss Statement Table 4.27: Summary of Balance Sheet 2007 (Rs in millions) 2008 (Rs in millions) 2009 (Rs in millions) Current Assets Fixed Assets Remarks Current assets have increased. Liquidity available is satisfactory. Gross block of the company has increased. Current Liabilities Long term Liabilities Liability position has increased marginally. Debts have increased significantly due to more investment. Table 4.28: Summary of Profit & Loss Statement Remarks (in millions) (in millions) (in millions) 85, , , have come down. Raw Material Cost 2, , , Expenses have increased very little. Operating Profit , , Operating profit has decreased. Substantial decrease 63, , , in Profit Bef. Tax. Profit Bef. Tax (PBT) Net profit 43, , , Net profit didn t improve at all

90 4.1.5 GUJARAT MINERAL DEVELOPMENT CORPORATION LIMITED Table 4.29 Balance Sheet of GMDC as at 31 st Dec-2009 Liabilities Dec Dec Dec (Rs in millions) (Rs in millions) (Rs in millions) Share Capital Reserves & Surplus Net Worth (1) , , Secured Loans (2) , , Unsecured Loans (3) 4, , Total Liabilities(1+2+3) 16, , , Assets Dec Dec Dec Gross Block 18, (-) Acc. Depreciation 5, Net Block (A) 5, Capital Work in Prgs. (B) Investments (C) Inventories Sundry Debtors Cash And Bank , Loans And Advances 12, , , (i) 15, , , , , , Provisions 7, , , (ii) 11, , , Net Curr. Assets (i - ii) (D) 3, , , Misc. Expenses (E) Total Assets (A+B+C+D+E) 16, , (Source:

91 Table 4.30: Profit & Loss Statement Dec (Rs in millions) Dec (Rs in millions) Dec (Rs in millions) 9, Other Income Total Income 10, Raw Material Cost Excise Other Expenses 4, Operating Profit 4, Interest Name Gross Profit 4, Depreciation Profit Bef. Tax 3, Tax 1, Net Profit 2, Other Non- Recurring Income Reported Profit 2, Equity Dividend (Source:

92 Ratio Analysis for 2009 Table 4.31: Analysis of Financial Ratios for 2009 Sl. No Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 15, = 11, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 15, = 11, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 11, It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = 4, Shareholder Equity = 12, It is not good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = 4, Interest = It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = 4, = 9, % It is safe

93 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = 4, = 9, % It is satisfactory 08. Net Profit margin = Net Pro it 100 Net Profit = 2, = 9, % It is not satisfactory. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = 4, Average Assets = % It is not satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Net worth Profit Before Tax = 3, Net Worth = 12, % It is good. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = 2, Average Net Worth = % It is not good

94 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = 4, Avg. Capital Employed = It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = = 9, It is satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = 4, It is good. 15. Fixed Assets turnover = Fixed Assets = = 9, It is not good

95 Ratio Analysis for 2008 Table 4.32: Analysis of Financial Ratios for 2008 Sl. No Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 13, = 10, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 13, = 10, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 10, It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = 6, Shareholder Equity = 10, It is not good. 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is not satisfactory. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is good

96 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is satisfactory. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not good. 09. Return on Assets = Operating Pro it 100 Average Assets Operating Profit = Average Assets = % It is satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Net worth Profit Before Tax = Net Worth = 10, % It is satisfactory. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is not good

97 Sl. No Ratios Particulars ( Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not good. 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = = It is not satisfactory. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = It is not satisfactory. 15. Fixed Assets turnover = Fixed Assets = = It is not good

98 Ratio Analysis for 2007 Table 4.33: Analysis of Financial Ratios for 2007 Sl. No Ratios Particulars (Rs in millions) Values Remarks 01. Net Working Capital = Current assets-current liabilities Current Assets = 11, = 8, Liquidity position is good. 02. Current Ratio = Current Assets Current Assets = 11, = 8, It is not safe. 03. Acid test or Quick ratio = Quick Assets Quick Assets = = 8, It is safe. 04. Debt-Equity Ratio = Long term debt Shareholder s Equity Total debt = 9, Shareholder Equity = 8, It is satisfactory. 05. Interest Coverage = Operating Pro it Interest Operating Profit = Interest = It is not safe. 06. Operating Profit margin = Operating Pro it 100 Operating Profit = = % It is satisfactory

99 Sl. No Ratios Particulars (Rs in millions) Values Remarks 07. Gross Profit margin = Gross Pro it 100 Gross Profit = = % It is good. 08. Net Profit margin = Net Pro it 100 Net Profit = = % It is not good. 09. Return on Assets = Operating Pro it Average Assets Operating Profit = Average Assets = % It is not satisfactory. 10. Return on Investments = Net Pro it before Tax 100 Net Worth Profit Before Tax = Net Worth = 8, % It is not safe. 11. Return on Net Worth = Net Pro it 100 Average Net worth Net profit = Average Net Worth = % It is not satisfactory

100 Sl. No Ratios Particulars (Rs in millions) Values Remarks 12. Return on Capital Employed = Operating Pro it 100 Average Capital Employed Operating Profit = Avg. Capital Employed = % It is not satisfactory 13. Cost of Goods Sold Ratio = Cost of Goods Sold Cost of goods sold = = It is good. 14. Operating Ratio = Cost of Goods sold + otherexpenses Other Expenses = It is not good. 15. Fixed Assets turnover = Fixed Assets = = It is not safe

101 Summary for Balance Sheet and Profit & Loss Statement Table 4.34: Summary of Balance Sheet 2007 (Rs in millions) 2008 (Rs in millions) 2009 (Rs in millions) Current Assets Fixed Assets Remarks Current Assets have increased. Fixed Assets have increased marginally. Current Liabilities Liabilities have increased. Liquidity position not affected. Long term Liabilities Long term debts have been paid off. Table 4.35: Summary of Profit & Loss Statement Remarks (Rs in millions) (Rs in millions) (Rs in millions) , have increased by 65.9 % Raw Material Cost Expenses have increased. Operating Profit , Operating profit has increased. Profit Bef. Tax (PBT) , PBT has increased. Net profit , Net profit has increased by 276 %

102 4.2 RATIO ANALYSIS USING TURBO C++ The ratio analysis of all the five companies from using Turbo C++ has been carried out. The output of the program is given below: ACC LTD Ratio Analysis for 2009 Fig. 4.1: Ratio Analysis of ACC Ltd. for

103 Ratio Analysis of ACC Ltd Fig. 4.2: Ratio Analysis of ACC Ltd. for

104 Ratio Analysis for 2007 Fig. 4.3: Ratio Analysis of ACC Ltd. for

105 4.2.2 Jindal Steel & Power Ltd Ratio Analysis for 2009 Fig. 4.4 : Ratio Analysis of Jindal Steel & Power Ltd. for

106 Ratio Analysis for 2008 Fig. 4.5: Ratio Analysis of Jindal Steel & Power Ltd. for

107 Ratio Analysis for 2007 Fig. 4.6: Ratio Analysis of Jindal Steel & Power Ltd. for

108 4.2.3 Tata Steel Ratio Analysis for 2009 Fig. 4.7 : Ratio Analysis of Tata Steel for

109 Ratio Analysis for 2008 Fig. 4.8: Ratio Analysis of Tata Steel for

110 Ratio Analysis for 2007 Fig. 4.9 : Ratio Analysis of Tata Steel for

111 4.2.4 Hindustan Zinc Limited Ratio Analysis for 2009 Fig. 4.10: Ratio Analysis of HZL for

112 Ratio Analysis for 2008 Fig : Ratio Analysis of HZL for

113 Ratio Analysis for 2007 Fig. 4.12: Ratio Analysis of HZL for

114 4.2.5 Gujarat Mineral Development Corporation Ratio Analysis for 2009 Fig. 4.13: Ratio Analysis of GMDC for

115 Ratio Analysis for 2008 Fig. 4.14: Ratio Analysis of GMDC for

116 Ratio Analysis for 2007 Fig. 4.15: Ratio Analysis of GMDC for

117 4.3 RATIO ANALYSIS USING TALLY 9.0 Tally 9.0 manufactured by Tally Solutions FZ LLC, Dubai, and Tally India Private Limited. It facilitates smooth and error free Excise Accounting for manufacturers and dealers engaged in manufacturing or trading of excisable goods. It is mainly used for the calculation of excise duties, taxes and other transactions. In this project Tally 9.0 is used to compute the balance sheet and the financial ratios of companies that can be obtained from it. However Tally 9.0 has certain limitations. It has been used to calculate only current ratio, quick ratio and debt equity ratio. In future the version can be modified to calculate other ratios. Preparation of balance sheet and ratio analysis of all the five companies from using Tally 9.0 has been carried out below: ACC Ltd Balance Sheet and Ratio Analysis For 2009 Fig. 4.16: Preparation of Balance Sheet of ACC Ltd. for

118 Fig. 4.17: Ratio Analysis of ACC Ltd. For Balance Sheet and Ratio Analysis For 2008 Fig. 4.18: Preparation of Balance Sheet of ACC Ltd. for

119 Fig. 4.19: Ratio Analysis of ACC Ltd. For Balance Sheet and Ratio Analysis For 2007 Fig. 4.20: Preparation of Balance Sheet of ACC Ltd. for

120 Fig. 4.21: Ratio Analysis of ACC Ltd. For Jindal Steel & Power Balance Sheet and Ratio Analysis For 2009 Fig. 4.22: Preparation of Balance Sheet of JSPL for

121 Fig. 4.23: Ratio Analysis of JSPL For Balance Sheet and Ratio Analysis For 2008 Fig. 4.24: Preparation of Balance Sheet of JSPL for

122 Fig. 4.25: Ratio Analysis of JSPL For Balance Sheet and Ratio Analysis For 2007 Fig. 4.26: Preparation of Balance Sheet of JSPL for

123 Fig. 4.27: Ratio Analysis of JSPL For Tata Steel Balance Sheet and Ratio Analysis For 2009 Fig. 4.28: Preparation of Balance Sheet of Tata Steel for

124 Fig. 4.29: Ratio Analysis of Tata Steel For Balance Sheet and Ratio Analysis For 2008 Fig. 4.30: Preparation of Balance Sheet of Tata Steel for

125 Fig. 4.31: Ratio Analysis of Tata Steel For Balance Sheet and Ratio Analysis For 2007 Fig. 4.32: Preparation of Balance Sheet of Tata Steel for